COLUMBUS, N.M. (AP) — The federal government is issuing a loan guarantee to a company that plans to build a $135 million plant in southern New Mexico to produce biofuel from algae.

The U.S. Department of Agriculture announced the guarantee Monday. It has been in the making since December 2009, when the agency first issued a conditional commitment for an 80 percent guarantee on a $54.5 million loan.

The financing will help Sapphire Energy, Inc., build and operate an integrated algal biorefinery in Columbus. Federal officials say it's all part of an effort to provide renewable commercial-scale biofuels.

Sapphire will be capable of producing 100 barrels of refined algal oil per day. That's about 1 million gallons annually.

The oil will be shipped to Louisiana to be refined by Sapphire's refinery partner, Dynamic Fuels.